Stocks fell on Thursday as concerns about stagflation rose after the latest U.S. economic data was released. The Dow dropped 375 points, while the S&P 500 and Nasdaq Composite fell 0.5% and 0.6%, respectively. The U.S. gross domestic product expanded 1.6% in the first quarter, below expectations, and the personal consumption expenditures price index increased at a 3.4% pace. Investors are worried about slowing economic growth and rising inflation, but major averages are on track for a winning week. Traders will be watching for March’s PCE reading on Friday morning to get a better understanding of the economic situation.
Google parent company Alphabet reported first-quarter revenue growth of 15%, beating analysts’ estimates. The company’s core ads business and AI investments were strong, with ad sales at YouTube seeing a 20% jump. Alphabet announced its first-ever quarterly dividend of 20 cents per share and plans to repurchase $70 billion in stock, showing confidence in its financial position. The stock rallied about 12% in extended trading, pushing Alphabet’s market cap past $2 trillion.
Microsoft is increasing spending at a rate not seen since 2016 but may still not be enough to meet demand. The company reported a shortage of data center infrastructure, specifically for deploying AI models. Microsoft’s fiscal third-quarter results exceeded estimates on the top and bottom lines, but revenue guidance was weaker than expected. The company will bump up capital expenditures in the current quarter to address the shortage and meet demand.
Paramount Global and Skydance Media are getting closer to a merger deal, with Skydance CEO David Ellison potentially becoming the CEO of Paramount Global and former NBCUniversal CEO Jeff Shell as president. Skydance Media and its backers are targeting May for finalized terms of the merger. One of the challenges is Paramount Global’s renewal agreement with Charter Communications for CBS and its cable networks, which is relevant to Paramount’s valuation.
Southwest Airlines is considering changes to its single-class, open-seating policy that sets it apart from other major U.S. airlines. CEO Bob Jordan mentioned that the airline is looking into new initiatives like changing the way they seat and board their aircraft. Analysts have suggested charging for premium seating or additional fees to increase revenue, but Southwest Airlines has differentiated itself by not charging for checked bags. The carrier’s chief commercial officer stated that people choose Southwest because they don’t have baggage fees.
Overall, investors need to keep an eye on economic data, company earnings reports, and potential mergers in the media industry. Concerns about stagflation, strong revenue growth in tech companies, spending increases to meet demand, and potential policy changes in major airlines are all important factors to consider in the current market landscape. Traders should stay informed and adjust their strategies accordingly to navigate the uncertainty and volatility in the market.
